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The Street
The Street
Martin Baccardax

Elon Musk Wins Request to Add Whistleblower Complaint To Twitter Case, But Is Denied Trial Delay

Twitter (TWTR) shares jumped higher Wednesday after Elon Musk was granted a request to add whistleblower allegations in support of his disputed takeover of the social media group, but was denied an attempt to delay the mid-October trial.

Chancellor Kathaleen McCormick of the Delaware Chancery granted Musk's request following a petition by his lawyer, Alex Spiro, during a hearing late Tuesday. 

Sprio had asked the court for a few weeks" to look into allegations made a former Twitter security chief, Peiter Zatko, that accused the social media group of insufficient oversight and a focus on profits that allowed spam accounts to proliferate on the micro-blogging platform.

Zatko, who is also know in the hacking community as 'Mudge', first provided details of his allegations last month to the U.S. Securities and Exchange Commission, the Department of Justice and the Federal Trade Commission.

The Tesla (TSLA) CEO was granted the right to include Zatko's allegations in his counter-suit against Twitter, which is demanding he follow-through on his early Spring promise to buy the company for around $44 billion.

However, Chancellor McCormick insisted the October 17 trial date will remain in place, suggesting any evidence from a Zatko deposition may not weigh heavily on her overall decision.

"Twitter has represented that the anticipated risk of harm has materialized over the course of this litigation," Chancellor McCormick wrote. "Twitter 'has suffered increased employee attrition' which 'undermines the company's ability to pursue its operation goals."

"'The company has been forced for months to manage under the constraints of a repudiated merger agreement, including Defendants' continued refusal to provide an consents for matters under the operating covenants'", she added. "I am convinced that even four weeks' delay would risk further harm to Twitter too great to justify".

Twitter shares were marked 4.25% higher in early Wednesday trading to change hands at $40.29 each.

Musk has been locked in public dispute with Twitter since early July over the amount of so-called "fake" or "bot" accounts on the social media platform, which he says constitute a material change to the merger terms he agreed in the spring.

Twitter has demanded that Musk pay the promised $54.20 per share for the group, with attorney William Savitt accusing Musk of using the 'bot account' controversy as a pretext to exiting his promised takeover.


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